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Trust and financial trades : lessons from an investment game wher reciprocators can hide behind probabilities

  • Radu Vranceanu

    ()

    (Economics Department - ESSEC Business School)

  • Angela Sutan

    (ESC Dijon Bourgogne - ESC Dijon Bourgogne)

  • Delphine Dubart

    (ESSEC Business School - ESSEC Business School)

This paper shows that if a very small, exogenously given probability of terminating the exchange is introduced in an elementary investment game, more reciprocators will choose the defection strategy. Everything happens as if they "hide behind probabilities" in order to break the trust relationship. Investors do not alter their behavior in a significant way, at least not for a very small external risk. Financial assets all come with a predetermined and contractual probability that by the time when the buyer has to receive the reward for his investment, "bad luck" might have brought the asset value down to zero. In the light of the experimental findings, such trades would not provide a favorable environment for building trust.

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Paper provided by HAL in its series Post-Print with number hal-00572384.

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Date of creation: 01 Oct 2011
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Handle: RePEc:hal:journl:hal-00572384
Note: View the original document on HAL open archive server: http://hal-essec.archives-ouvertes.fr/hal-00572384
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  1. Batista, Catia & Potin, Jacques, 2006. "Stages of Diversification and Capital Accumulation in an Heckscher-Ohlin World, 1975-1995," ESSEC Working Papers DR 06008, ESSEC Research Center, ESSEC Business School.
  2. Berg Joyce & Dickhaut John & McCabe Kevin, 1995. "Trust, Reciprocity, and Social History," Games and Economic Behavior, Elsevier, vol. 10(1), pages 122-142, July.
  3. Crifo, Patricia & Mottis, Nicolas, 2010. "SRI Analysis and Asset Management: Independent or Convergent? A Field Study on the French Market," ESSEC Working Papers DR 10006, ESSEC Research Center, ESSEC Business School.
  4. Jason Dana & Roberto Weber & Jason Kuang, 2007. "Exploiting moral wiggle room: experiments demonstrating an illusory preference for fairness," Economic Theory, Springer, vol. 33(1), pages 67-80, October.
  5. Radu Vranceanu & Delphine Dubart & Maxime Laot, 2010. "Une échelle de mesure de la connaissance en raisonnement économique et résultats d'une enquête menée en décembre 2009," Post-Print hal-00542948, HAL.
  6. Batista, Catia & Potin, Jacques, 2008. "International Specialization and the Return to Capital, 1976-2000," ESSEC Working Papers DR 08001, ESSEC Research Center, ESSEC Business School.
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